Euro once again stagnating

For a few weeks there it looked as if it were a "slam dunk" that the euro would rise to $1.50,but it simply did not happen. Traders and speculators pushed as hard as they could, but the $1.48-$1.49 range was all they could manage. Now, the euro is back down where it was at the end of October, with the March euro futures closing at $1.4370 on Friday.

A big part of the loss of momentum and the pullback was the fact that the Fed did not cut its target rate as aggressively as many people expected this month, economic reports were not as weak as feared, and in fact people are actually chattering about the very real possibility that the Fed might not even cut its target rate at the end of January. Lower interest rates make the U.S. dollar look less attractive to investors, or so the "story" goes.

Meanwhile, U.S. exports are getting a healthy boost from the "weak" dollar.

Where the euro goes from here is up in the air since we no longer have a solid consensus on what the Fed will do with interest rates, where the overall U.S. economy is headed, or how deep-pocketed the speculators are who have been pushing up the euro.

As far as where speculators think the euro may be headed, euro futures out at June 2009 were only at $1.4264 on Friday, so there isn't exactly a lot of "slam dunk" enthusiasm for betting on an aggressive ongoing upwards trend, so far.

The good news about the decline of the dollar is that it puts downwards pressure on imports and upwards pressure on exports which combine to put upwards pressure on GDP. It also puts upwards pressure on the revenue and earnings of multinational companies.

-- Jack Krupansky